Most investors know to look before they leap, and even then, there is an element of luck that is inevitably required when successfully spinning the wheel of online trading. Markets are notoriously difficult to predict. Some even say that even after years of experience trading in stocks and shares, you’d still arguably be better off just investing in an index fund. That’s the safe option, but where is the fun in that? Where there is a reward, there is invariably risk, and this is especially true when it comes to trading in cryptocurrencies.
Understanding the Volatility of the Market
There is no substitute for experience, or at the very least, making yourself as informed as possible about what you are dealing with. This is particularly true of cryptocurrencies; they are one of the most extremely volatile markets. This is because cryptocurrencies are, by definition, decentralized from any particular regulatory authority, and as a result, there are no standardized means by which value is defined; crypto is as valuable as people believe it is at the time.
For instance, one could look at the price of dogecoin today at okx.com; according to OKX, dogecoin went from $0.01 to $0.65 in just six months before falling down again to stand at just under a year $0.07. This is not the kind of seismic shift one usually sees in centralized currencies like the dollar or the pound. Knowing that beforehand is extremely useful prior to investment to understand the level of high-risk, high reward here. On the one hand, the volatility of crypto will frighten away many investors, whereas others who, after investing in dogecoin in 2018, were made millionaires within the space of a few months in 2021.
The Role of Social Media
Traditional stockbrokers keep themselves informed by constantly eyeballing the stock market to spot patterns or trends within that market, investing when value is low, and then selling when value is high. Seismic shifts in the stock market, which have the potential to yield the most profit, also result from major changes in the business landscape, i.e., things like company mergers, companies going bankrupt, wars, natural disasters, or global pandemics, the idea being to ride these big changes in the value of things to leverage profit by buying at selling at key intersections. Again, however, value is often far more subjective with cryptocurrencies and is largely determined by public opinion. This is why understanding social media trends, memes, and the ability for an opinion to go viral is an essential skill for any successful crypto investor.
Web Analytics Tools
In a similar vein, measuring current opinion on cryptocurrency is not unlike analyzing keywords for search engine optimization. In both contexts, value is in large part determined by notoriety and an abundance of web traffic. Blogs are also a useful way to gauge public opinion and help an investor to judge where the market may be going, so that they can make a better judgment call in how to handle their investment.